Vacancies fall across major capital cities

Rents on the rise

SQM Research will report further significant declines in rental vacancy rates in all three of the major capital cities, as the return to the office shows the first signs of life.

Brisbane now has a rental vacancy rate of just 0.7 per cent, the lowest on record (going back to 2005). 

Source: SQM Research

Even in some of Brisbane's inner suburbs, vacancy rates are now hitting all-time lows for this data series.

In Adelaide, meanwhile, the vacancy rate is at record lows of just 0.3 per cent.

Rents are set to increase as the rental shortage intensifies. 

Job ads rise again; highest since 2008

Jobs ads at 14-year high

Job advertisements increased by another +10,200 or +3.7 per cent to 282,400 in March, which is the highest level since all the way back July 2008.

Ads are now 68 per cent above their pre-COVID levels, according to the Skills Commission.

The back series underscores the power of the economic recovery in Australia. 

All Australian states and territories were in positive territory over the month, and indeed over the year. 

Election push

There's a decent chance we see an unemployment rate reported with a '3' in front on it on Thursday (or if not, by next month, just before the Federal Election on May 21).

The median market forecast is for the national unemployment rate to tick down a notch on Thursday from 4.0 per cent to 3.9 per cent. 

Not that the Leader of the Opposition would know, apparently, after today's election car crash presser :o)

40 more days of this to go, ugh...

Immigration reboot to gather pace

Open borders

A brief look at the projections for net overseas migration here (or click on the image below):

Interest repayments hit record low

The debt pile

The ratio of household debt to annualised disposable income increased to 1.86x in 2021, a little below the levels seen in 2019.

Of course, net of offset accounts (not to mention deposits) net debt ratios are far lower than previously was the case.

Household interest payments fell to the lowest level on record, across a data series running back to before Star Wars was released...in 1977.

With mortgage rates now rising, and the cash rate expected to rise forthwith, interest repayments will obviously begin to climb from here. 

It's also worth noting that the graph takes no account of principal repayments. 

Still, the Reserve Bank's assets and liabilities chart shows that overall households are in decent nick.

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Election fever is set to hit the screens over the coming long six weeks, with the Federal Election date called for May 21. 

Foreign resi approvals plummet to 15-year low

No foreign dwelling buyers

I've posed the question several times here as to where everyone is going to live as immigration resumes, given that new arrivals into Australia tend to be renters initially.

The Foreign Investment Review Board's 2021 Annual Report provided little new information to change that view.

Over the past decade new-build apartment projects have largely been funded by superannuation fund investors and non-resident investors, mainly from China.

Neither cohort is buying heavily any more as credit has tightened.

And as the HomeBuilder stimulus impact recedes we're heading squarely for a chronic shortage of rental dwellings.

The number of FIRB residential real estate approvals fell another 38 per cent in FY 2021 to sit at the lowest level in a decade-and-a-half. 

The value of FIRB residential approvals also crashed another $6.7 billion lower to just $10.4 billion.

The comparative figures for previous years may not be directly comparable for various reasons, but when I ran the charts in 2016 the equivalent figure was above $72 billion. 

I used to analyse out the numbers by state and development type, but the residential investment figures are now so small they aren't going to move the needle in any event. 

Queensland picked up some investment in new residential developments, but overall the figures were a massive fizzer for residential property.

Commercial real estate projects attracted the bulk of foreign interest and approvals in that sector surging to $82 billion as the economy rebounded. 

What's happened here?

Firstly, there's barely any lending to non-resident investors for residential property these days.

Once common among even larger lenders, regulation has effectively shut this lending channel down.

Secondly, punitive state stamp duty surcharges and taxes have also hugely discouraged foreign buyers. 

Thirdly, Australia's relationship with China has cooled over recent years, while the ongoing absence of Chinese international students has disrupted one of the possible channels for investment. 

And fourthly, COVID-19 restrictions and border closures dissuaded some prospective buyers from travelling to inspect projects and developments. 

Somehow the various policymakers may need to take a look at allowing non-residents to invest in new residential properties again.

Aussie landlords tend to steer clear of new apartment projects these days due to the increased risk of loss on resale.

Meanwhile residential vacancy rates continue to plunge towards zero. 

Stock shortages for Brisbane & Adelaide

Stock shortages

There are significant stock shortages in Adelaide, where property listings are 24 per cent lower than a year earlier. 

In Brisbane, listings are down more than 30 per cent.

SQM Research with the latest figures:

SQM sees ongoing "massive price increases" for those cities. 

Media release is here. 

Investment Strategies mini-series: The 52-week low formula

52-week low

This week on the Low Rates High Returns podcast look at another of the famous old investment strategies: the 52-week low formula.

Tune in here (or click on the image below):

You can check out our full series at Apple podcasts, or you can tune in at Soundcloud, Stitcher, or Spotify.

Don't forget to leave us a friendly review, as it helps us to get the word out. 

Thanks! :-)

Vacancies lowest on record

Vacancies hit record low

Domain released its latest vacancy rate figures, with vacancies hitting the lowest level on record.

Hobart increased a little over the month, and Perth was steady - everywhere else recorded declines as the first month of open international borders impacted rental markets around the country.

Sydney's vacancy rate of 1.4 per cent is the lowest Domain has ever recorded for the harbour city.

Canberra and Perth also remain at record lows, of 0.5 per cent. 

Adelaide, meanwhile - where we have been buying houses in recent times - has the lowest vacancy rate on record for a capital city of just 0.2 per cent, potentially portending large increases in rents for that city. 

Source: Domain

Investors are likely to continue driving prices higher in Adelaide, looking at these numbers, with entry prices more affordable than in most other capital cities. 

The trend is for further declines ahead as employment hits a record high and immigration picks up.

Source: Domain

The Domain article and details are here.